Archives for the month of: July, 2012

As a follow-up to my previous post, Bloomberg just ran the story that the reason for Joel Ewanick’s ouster as CMO at General Motors was his sponsoring of the Manchester United jersey, and the terms (read: cost) of that agreement.

It makes total sense for GM to be on the chest of ManU players. Fantastic global exposure and a very good brand defense strategy.

The real issue, in my opinion, is not cost, but the fact that Ewanick chose Chevrolet as the mark to appear on the jerseys. He made the right move, then completely ruined it by pairing a crappy automobile brand (I’m excluding trucks) with a hugely successful global sports brand.

Great idea! Wrong brand!!!

The right move would have been to put the GM logo on the jersey. Whether or not you like GM’s products, it’s difficult to argue with the company’s success as a global automobile manufacturer. Yes the company has fallen on tough times recently (as has Manchester United!), but in advertising we don’t discuss finance, we exploit emotion.

The money allows Manchester United to continue shopping for global talent (while the Glazers suck the club dry for money), allowing the club to continue asserting itself in domestic and international competitions. And as ManU’s games are broadcast internationally—a huge viewership!—GM will receive valuable brand impressions in both established and emerging markets.

A win-win, if you know how to play it right.

CEO.com, in collaboration with Domo, recently published the  “2012 Fortune 500™ Social CEO Index” research report. The “research” cites the percentage of CEOs using social media, versus the general public’s use.

For example, 3.8% of CEOs have registered for Twitter, vs 34.3% of the U.S. population. But 25.9% of CEOs have LinkedIn profiles, whereas only 20.2% of the U.S. population does.

The implied conclusion is that since someone else is doing something, you should be doing it, too. Never a good-enough reason by itself to do anything in business (if you know how to define and execute strategy).

For LinkedIn, my guess is that the number of business professionals with LinkedIn profiles is actually higher than 20.2% rate of the total population (e.g., my eight-year-old nephew doesn’t have a LinkedIn profile), but that’s beside the point.

In the end (pg. 4), the report does provide a conclusion, a neat listing of benefits based on an employee survey, such as (among others):

  • 78% want to work for a social CEO
  • 94% believe social CEOs will enhance the company’s brand

However, NONE of these and other benefits came from the CEO.com/Domo research itself. They all came from other research conducted by BRANDfog and IBM, neither one of which is directly cited in the notes.

If you want to read the CEO.com/Domo, report, here’s the link: http://www.ceo.com/wp-content/themes/ceo/assets/F500-Social-CEO-Index.pdf (PDF; now you don’t have to register and surrender your privacy to get something useless in return).

For some really useful insights, here’s the link to the BRANDfog research: http://www.brandfog.com/CEOSocialMediaSurvey/BRANDfog_2012_CEO_Survey.pdf (PDF).

I can’t locate the IBM research cited. (I also didn’t look very hard.)

A while ago I wrote about soccer (i.e. football) and commercial sponsorships. A month later I learned that Manchester United was planning to go public on the New York Stock Exchange, which made Casillero del Diablo’s advertising that it was the “official wine partner” of Manchester United seem almost prescient. The company had apparently placed itself in a good position to ride the coat tails of ManU’s global media push.

What Casillero del Diablo didn’t count on was the Glazer family’s inability to comprehend where the actual financial value of ManU comes from: the consumers of the ManU product.

On Thursday, The Guardian posted “Manchester United’s New York setback exposes failings of Glazers plan,” by Stuart James. The piece nicely describes the IPO that the Glazers had planned, and how it would offer no value to buyers (you really wouldn’t be able to call them “investors” based on the terms proposed).

A first IPO had already failed in Asia, where a rabid fan base exists. Fans in Asia have committed suicide when they were not able to secure tickets for the team’s exhibition matches. All that  the Glazers seem to understand is that they are currently owners of an internationally valuable trademark, and that the next best place to exploit that would be the NYSE. But not many people in the U.S. care about the sport or that team in particular. NASCAR, on the other hand, would be a smash hit IPO.

What the Glazers do not understand is that a brand exists only in the mind of the customer/consumer. And that makes a brand ephemeral. The definition of ephemeral is “short-lived,” but we know there are hundred-year-old brands, and older. What ephemeral refers to is that as soon as you disenfranchise the consumer—the individual who gives your product or trademark brand status—this asset loses value.

Being ephemeral is worse than being intangible. Patents are intangible, but they have a guaranteed shelf-life. And the Glazers don’t seem to grasp that you cannot just milk a brand for revenue without also nurturing the brand consumer, which is the process that gives a brand longevity.

Customer satisfaction gives your brand life and keeps it alive.

(Innovation helps, too, but that’s based on “utility” which is unique to each consumer.)

CMOs get no respect. They have a lot of expectations placed on them—sometimes even quota—but marketers have no credibility with CEOs (“73% of CEOs say marketers lack credibility”, Lara O’Reilly, Marketing Week, June 2011), and marketing doesn’t have the board’s ear either (“Why CEOs Can’t Blame Marketing or Sales for Lack of Alignment”, Christine Crandell, Forbes, February 2011).

Both articles claim different reasons for the lack of respect. Lara O’Reilly cites a study by Fournaise that makes very good points why the CMO is at fault, and Christine Crandell opines eloquently why the CEO is to blame for the lack of respect the CMO gets.

The general complaint is that marketers cannot prove with certainty how much impact their efforts have on the top-line of the business (my opinion: because marketing is a process that takes time, and it’s difficult to measure any network effect with precision).

Jerome Fontaine, CEO and chief tracker of Fournaise, says that “. . . marketers [need to] start speaking the P&L language of their CEOs. . .” CEOs want CMOs to have a greater grasp of the business, not just the pretty side of relationship building. CEOs want to know about “revenue, sales, EBIT and market valuation.”

Market-Based Management: Strategies for Growing Customer Value and Profitability (Pearson Prentice Hall, Fifth Edition, 2009)—a fantastic book for anyone who needs to grasp the basic concept that marketing is a lot more than promotion and advertising—offers a simple formula to show what incremental revenues marketing produces:

Net Marketing Contribution, Roger-Best, Pearson Prentice Hall

Net Marketing Contribution, Roger-Best, ©2009 Pearson Prentice Hall

McKinsey even published a whole article on “Measuring marketing’s worth” (see previous post). The article tries to teach the CEO how to appreciate the CMO. Instead, in my opinion, the article is actually an excellent blueprint to help aspiring CMOs prepare for their larger role. Still, ROI does little to convince the CEO that the CMO is moving the needle in an appreciable fashion.

The more serious problem appears to be that the two sides do not understand one another. The CEO doesn’t understand marketing beyond promotion and advertising. The CMO doesn’t understand accounting and finance. Two ships passing in the night.

Let’s have a brief look at both positions.

CEOs are captains of the ship. They must have an understanding of every core discipline in the company, even if they themselves cannot be expert at everything. That’s why they hire very smart people to do the things they themselves don’t have the time or knowhow to do well consistently. CEOs are also the face of the company, and in some ways must embody the brand. They must be super-smart brand ambassadors in both B2B and B2C settings.

The CEO is responsible for:

  • Corporate performance—profitability and valuation.
  • Corporate strategy—assuring that the company remains a successful going concern.
  • Capitalization—so that the company can reinvest in growth and innovation.
  • Corporate culture—creating the desired climate and leading by example.
  • The C-Suite—recruiting the best executive talent so that the company outperforms.
  • Executive performance—understanding the correct performance metrics (Christine Crandell’s point).

CMOs are brand-builders who craft unique and powerful value propositions. If all they think themselves responsible for is lead generation, then they are only advertisers. CMOs must want to influence innovation (through voice of the customer and competitive positioning), and lead sales, marketing, and customer care. You read correctly; I believe the marketing department must own the customer (customer lifecycle management). Sales, promotion, advertising, and customer care are all functions of marketing; marketing being the discipline of bringing a product into the market successfully. And a sale is not successful unless the customer is happy long-term.

The CMO is responsible for:

  • Competitive strategy—being one step ahead of direct competitors, new entrants, and substitutes.
  • Branding/positioning—placing irresistible core values in the buyer’s mind.
  • The customer—lifetime customer satisfaction and perceived value.
  • Pricing—for the greatest lifetime profit and customer retention (not volume-based).
  • Corporate image—the public perception of the company.
  • Lead generation—meaningful and authentic message dissemination that moves markets.

So apparently there is little overlap between the CEO’s and CMO’s responsibilities. Crazy, since they are co-pilots for success.

Back to the Fournaise study. Revenues, sales, and EBIT are accounting principles. Valuation is a finance principle.

Basic accounting principles are easily learned. I bet there’s a good Dummies-book out there. Now it finally dawns on us: we marketers are hated by everyone in the company who values a balance sheet. Marketing, the entire department—overhead and all marketing activities—is an expense. No wonder there is such a myopic focus on ROI and lead generation. CMOs must perform by the fiscal year calendar, which pretty much kills any long-term strategic and tactical initiatives around building a brand.

The only time marketing expenses are “good” is when they create a total corporate loss that the company can then write off in subsequent periods. That in itself is an untenable situation.

Accountants lord over the marketing department, however subtly.

To win real respect, CMO’s must increase the value of the company beyond the sum of its future earnings. Good ones do, but few of them know how to prove it. And that’s the real rub: CEOs and accountants want CMOs to prove something that they’re not permitted to prove by accounting standards.

Goodwill—what I call the toilet bowl of the balance sheet, because it’s essentially a bunch of hooey—does not permit for the accounting of internally created value (read: brands). Only acquired brands can be accounted for on the balance sheet under goodwill. That math is actually very simple: brand value is the difference between the book value of a company, and what it was actually acquired for. And that’s the needle (read: multiple) that the CMO has to move.

Which needle? The valuation needle.

So, don’t get another MBA, this time in finance. Learn about valuation via an adult-ed course at your local community college or take an online course. Even a simple search for “company valuation” on Investopedia brings up great results.

These are not tricky concepts, but they do take time to acquire as skills. The best thing you can do is practice for a little while, and then begin to build a valuation model for your company that you test over time, and that shows how you are moving the needle (or could be moving the needle given permission).

Give it some months, then you spring it on your boss and. . .*BAM*:

  • Instant credibility with the CEO and the board.
  • Bigger budget!
  • Permission for long-term strategic planning and tactical execution.
  • Increased self-worth (and probably pay if you negotiate well at the close of the fiscal year).

And now for the real conclusion: career advancement is not the real benefit here.

There are many different valuation models, and valuation, for the most part, is a bunch of hooey, too. It’s like selling your home, which is worth only what someone else is willing to pay for it, not what you think it is worth. The book value of your home is the worth of the land and the dwelling on it—at cost. That’s what you pay taxes on. But you know that there’s additional value in the place. And that value is determined by many factors: listing price of comparable dwellings, ranking of school district, quality of home construction, proximity to emergency services, etc. These and other factors give your home value beyond book.

The better prepared you are for your buyer—the better you can support your arguments in your valuation model—the more likely you can affect a positive outcome for yourself. That’s because valuation teaches you to examine where and how marketing adds value to the company. And when you understand that, you also market better.

And that’s how you build a brand, by listening to the market and understanding how to respond. Your model will tell you what to pay attention to. What are brands? They are needle-movers; they get chosen more frequently, even at higher prices. You can be a needle-mover, too.

[And thus finance quietly trumps accounting. But don’t tell the accountants.]

A decade ago (and before) there was a publication called “Business 2.0.” It wasn’t a bad magazine, but its demise was a certainty when the dot-com bubble burst.

The magazine’s name came from the evolution of the Web. Web 1.0 meant having a website. Web 2.0 meant having an SLA. And because the Web and uptime would revolutionize everything, Business 2.0 meant that nothing we learned from business in the past mattered anymore.

Today we are still using the phrase Web 2.0, and on occasion even business 2.0 (now lower case), but we’ve learned that the past is still relevant. In the interim the meaning of Web 2.0 shifted from SLA to ROI. ROI means generating a quick recoupment for the cost of acquiring a solution. But this rarely means TCO (total cost of ownership), because there usually is no real measure for whether the 2.0 solution truly helped the company, either by making it more efficient of profitable.

So what is business 3.0? It’s not a magazine. It’s brand trench warfare driven by Web 3.0.

Web 3.0 is about being a digital front-end, a portable brand experience. It’s about giving people the ability to interact with mundane and exciting things in their lives whenever and wherever they want. It isn’t about mobile, and it isn’t about social media.

It is about letting the end-user make choices and decisions in real-time. PI (personal intelligence) instead of BI, driven by your brand.

Is txt-banking exciting? How about taking photos of physical checks? NOT EXCITING. But very useful. How about finding your car? Shopping for shoes while riding the bus?  Attending lectures on your mobile phone? Crowd-sourcing? Competitive intelligence? Pattern recognition? Location-based services? Near field communication? Help in medical emergencies? All tailored to the individual.

What is the lesson for marketers?

Web/business 2.0 was about opening individual doors to sell individual solutions—a crowbar approach; effective but crude. Web/Business 3.0 is about creating seismic events in the marketplace, extending the length of the crowbar to unhinge the competition or an entire market.

That’s what your brand has to do. It’s not just about utility. It’s about crushing the competition.

Branding 3.0: position with care and also extreme prejudice! Let the buyer know that you solve a problem so completely that no other solution needs consideration.

As always, communicate benefits, not features.

The secret to successful marketing is that you need to bring the horse to water, but the horse must believe it found the water itself.

You do that by enlarging the pond. Unbeknownst to the horse, the next time it looks around it sees the solution to its problem and consumes it.

What that really means is that you must understand your customer. And since you likely have more than one customer profile (marketing speak: segmentation), you’ll need to address your multiple customer-types based on their preferences.

How many ponds do you have? And how are you filling them?

Make sure that your brand is not a hedging instrument, but a competitive differentiator.

Lots of people have business ideas. Some of them actually turn these ideas into viable companies. They don’t have to be large companies to be successful; just profitable.

Many people, including established business leaders, follow this approach to product and brand development:

Vision - Execution

Rapid prototyping is certainly one way to find out if your idea will be successful. It also follows a very common entrepreneurial mantra: fail fast. This is certainly the right approach if you are not betting much, and therefore have little to lose.

If you are risking a little more—say, your mortgage, or the future of your company—a more thoughtful approach is this:

Vision - Strategy - Tactics - Execution

Now thought and analysis come before your putting a PayPal button on a mail-order lard sandwich website or the opening of garden gnome restoration store.

Vision is the idea phase. You’ve observed something that you can do better, or for which no solution exists as yet.

Strategy is the positioning phase. This is the hardest part, because you need to get this right: you define the core essence of your offering to which a self-selecting audience will respond. You don’t just decide to have a luxury or mass-market product, you envision your buyer and why he/she will be attracted to your design.

However, before moving to the tactics phase, you also do some real analysis. You analyze your fledgling company (SWOT analysis), your product (VRIO analysis), and the competitive landscape (Five Forces).

Once you’ve figured out your uniqueness and competitive white-space, you can move on to the next step.

Tactics are about process. How will you get your product made (within budget and on time)? How will you get it distributed, noticed, and sold?

Here you realize you cannot accomplish everything by yourself. You need to delegate to other experts. You are the expert in the why and what of your product/service. The others are experts in the things you don’t know or don’t have time to do well. Don’t just rely on smart people for this, rely on people who are smarter than you in their fields of expertise. Then let them do their jobs. But communicate all the time.

Now comes the other hard part.

Execution—marketing, sales and customer care—is about people. Your people; your corporate culture. This is what touches the customer, and what must communicate with one voice. Is the essence you have promised carried through all the way?

Here is where many make a classic mistake. You want to over-deliver. You want your customer to have the best experience ever. Instead, you need to deliver to the correct expectations; the expectations you have set in the positioning, marketing, and sales phases (which need to be the same throughout; one voice!).

Do not over-deliver on product reliability, features, customer service, etc. If you do, then you will have raised the expectations bar permanently. Obviously, if you’ve promised 24/7 world-class service, then you need to meet that expectation. But if you’ve promised 18/7 world-class service, but deliver a higher level, then you will disappoint if later you “fall back” to 18/7 world-class service.

In other words, realistically (not academically or theoretically) you need to do this:

Idea - Positioning - Process - People

Here is what goes on in your customer’s mind. Let me narrate:

  • “I have a need/problem.”
  • “Is there a solution out there that I can trust?”
  • “Let me do some research with my trusted advisors and networks.”
  • “This product/service/solution is great/terrible/neutral.”

In other words:

There are no brand do-overs. Brand is the perception of how you positioned your offering and whether it was an experience congruent with the buyer’s expectations.

This is a linear path. Continuous improvement and cyclical refinement only happen in the last stage. That’s where you get to keep and defend your brand, and entertain brand extensions.

If your customer never permits you to get to the last stage, because you’ve not achieved positive brand status in the buyer’s mind, then you might as well advertise in the Yellow Pages, because you couldn’t differentiate yourself and will have been an also-ran.

So do this at every stage:

Listen - Listen - Listen - Listen

OK, here’s a brand strategy cheat sheet:

Brand Strategy Cheat Sheet

I find this post on Clients from Hell completely inspiring:

I got this email once from some lawyer in Nigeria and when I opened it and clicked the link, the same email was sent it to everyone in my contact list. I thought, hey, this is a pretty smart and simple marketing technique.

When I send out this email to the 4,000 people, I want it to automatically forward to everyone in their contact list.

Can you have this done for me by tomorrow?

Don’t do this. But he’s got the right idea!

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